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AP Microeconomics

Subjects : economics, ap
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.

2. The mechanism for combining production resources - with existing technology - into finished goods and services

3. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good

4. The price of a good measured in units of currency

5. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down

6. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good

7. Es = (%dQs) / (%dPrice)

8. The practice of selling essentially the same good to different groups of consumers at different prices

9. Models where firms are competitive rivals seeking to gain at the expense of their rivals

10. The additional cost incurred from the consumption of the next unit of a good or a service

11. The change in quantity demanded resulting from a change in the price of one good relative to other goods

12. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0

13. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption

14. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic

15. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.

16. The total quantity - or total output of a good produced at each quantity of labor employed

17. The most desirable alternative given up as the result of a decision

18. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good

19. Ei > 1

20. The output where ATC is minimized and economic profit is zero

21. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good

22. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus

23. Two goods are consumer substitutes if they provide essentially the same utility to consumers

24. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power

25. Exists if a producer can produce a good at lower opportunity cost than all other producers

26. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur

27. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it

28. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK

29. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage

30. The additional benefit received from the consumption of the next unit of a good or service

31. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run

32. Entry of new firms shifts the cost curves for all firms upward

33. Ed = (%dQd)/(%dP). Ignore negative sign

34. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity

35. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials

36. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand

37. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income

38. Ed < 1

39. A good for which higher income increases demand

40. Product demand - productivity - prices of other resources - and complementary resources

41. ATC = TC/Q = AFC + AVC

42. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit

43. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits

44. The difference between total revenue and total explicit and implicit costs

45. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.

46. The marginal utility from consumption of more and more of that item falls over time

47. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.

48. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good

49. The ability to set the price above the perfectly competitive level

50. 0 < Ei < 1